Disclosure And Accounting Standards Committee01 Sep 2001
The private sector-led Disclosure and Accounting Standards Committee ("DASC") was set up by the Singapore Government in December 1999 to review the process by which accounting standards are set, maintained and regulated in Singapore and to study ways to promote best practices in disclosure requirements amongst publicly listed companies in Singapore. A list of the DASC members is at Appendix 1.
The DASC completed its review and submitted its report containing 22 recommendations to the Government in September this year. In the course of its review, the DASC conducted two public consultations in December 2000 and May 2001 to seek public feedback on its proposals. This was followed by a dialogue session with respondents in August 2001, before the DASC finalised its report. The DASC Final Report has incorporated the comments from the two public consultations and the dialogue with respondents. A copy of the DASC Final Report is at Appendix 2.
The Government has accepted all the DASC recommendations. We would like to thank the Chairmen and members of the Committee for their good work in helping to raise the disclosure and accounting standards in Singapore.
The following are the key recommendations from the DASC:
Compliance with Accounting Standards
The DASC recommends that compliance with prescribed accounting standards by companies be made a legal requirement. Deviations from accounting standards would be allowed only if such deviations are needed for the company to present a "true and fair" set of financial statements. In such an event, the nature, financial effect and justification for such deviations should be fully disclosed in the financial statements. Auditors' confirmation of their agreement to the deviations would be required. Listed companies should also make such disclosure in all announcements of the listed company's financial results and financial position.
The DASC's recommendation to legislate compliance with prescribed accounting standards is consistent with the practices in the US, UK and Australia. Currently, there is no statutory requirement for companies in Singapore to comply with accounting standards. To position Singapore as a key business and financial centre, we need to give investors the confidence that financial statements are prepared in accordance with the prescribed accounting standards. At the same time, a certain degree of freedom is allowed as long as the auditors agree to the deviations. This balanced approach allows companies some flexibility, while providing readers of financial statements with the assurance that deviations from accounting standards are made with the confirmation of the auditors. We will be amending the Companies Act to incorporate this requirement.
Prescribed Accounting Standards
To align ourselves with international standards, the DASC recommends that Singapore adopt the standards issued by the International Accounting Standards Board (IASB). The standards adopted would be the prescribed accounting standards in Singapore.
The Government accepts this recommendation and would name the prescribed accounting standards as "Financial Reporting Standards" or "FRS". For Singapore to grow as a world-class business and financial centre, we need to attract companies to incorporate and list in Singapore. As business costs is an important factor, our rules should not add unnecessary costs to companies.ensure that investors' interests are protected. In particular, investors should always be able to obtain relevant advice from investment managers who can make appropriate analyses and comparisons of corporate performance. We note that the DASC has proposed a safeguard in its recommendation. If listed Singapore-incorporated companies want to use alternative standards without reconciling to the prescribed accounting standards in Singapore, they must satisfy two conditions:
(i) the alternative standards are allowed by the Singapore Exchange (SGX); and
(ii) the companies are also listed on foreign exchanges that require these alternative standards.
For unlisted Singapore-incorporated companies, the Registry of Companies and Businesses may permit them to use alternative standards that are allowed by the SGX, without the need for reconciliation to the prescribed accounting standards in Singapore. On balance, the DASC's approach would protect investors" interests without affecting our attractiveness to companies who want to incorporate and list in Singapore.
Accounting Standards Setting Process
Currently, accounting standards in Singapore are set by the Institute of Certified Public Accountants of Singapore ("ICPAS"). Following the DASC's recommendation to legislate compliance with the prescribed accounting standards, the DASC felt that it would not be appropriate for the accounting standards setting authority to reside with a professional organisation. In line with practices in the US, UK and Australia, the DASC recommends that the Minister for Finance establish an independent panel comprising representatives from the various stakeholder groups. These include accountants, investors, bankers and businessmen. The Government accepts this recommendation and will name this panel the Council on Corporate Disclosure and Governance ("CCDG"). The establishment of this Council will require amendments to the Companies Act which is planned for early 2002. One of the CCDG's roles is to help improve the rigor of the standards-setting process with its wider and more direct representation. Besides prescribing accounting standards in Singapore, the CCDG would also assist the Government in the continuous review and enhancement of corporate governance and disclosure practices. The CCDG members will be appointed in their individual capacities and will represent the concerns and views of the various stakeholder groups.
The DASC recommends that all listed companies should make financial announcements on a quarterly basis for financial periods commencing on or after 1 January 2003. This requirement will be included in the SGX Listing Manual. Such quarterly announcements, which need not be audited, should be made within 60 days of the quarter end. Timelier reporting is important in bringing about greater transparency and improved corporate governance. These are important factors for making Singapore a world-class business and financial centre. Listed companies are encouraged to adopt quarterly financial announcements earlier if they are able to do so.
Independence of Public Accountants
Public accountants have an important role in society. The investing public, as also other stakeholders, relies on public accountants for sound financial accounting and reporting. It is therefore important to ensure the objectivity and integrity of public accountants in their capacity as company auditors.
The principles of auditor independence apply to auditors of all companies, but auditor independence is especially important for auditors of public companies as these companies can raise capital from the general public. Hence, the DASC recommends that a
DISCLOSURE AND ACCOUNTING STANDARDS COMMITTEE
LIST OF MEMBERS